Move Over Who?: Part III

So where was i?

Oh 1st December 2004.

Flashback from Part II:

Karensoft is seeking an extension to their proposed private placement.Huge implications here. What is wrong? Not laku wor. Why? How come? In a hot, hot market where placement shares were in such a demand, Karensoft is seeking an extension.

Interestingly... or perhaps should i say strangely... came Move over Bill, Karensoft coming through! .. the article/ the write-up... proclaiming Karensoft's huge potential...was published 2nd December 2004!

A write-up insinuating a possible 53% upside for buyers of Karensoft.

According to Kenanga, potentially Karensoft might have a terror, sibeh geng software.


The ExecSuite will be the key earnings driver for Karensoft from FY05 and beyond. The ExecSuite will also not only transform Karensoft from purely being an ERP player to a real competitor in the Office Suite market, it would potentially enhance business opportunities abroad as the market for the ExecSuite is global.

As there is no direct competition for Karensoft’s ExecSuite in the local market, we are using a fair P/E of 15x for FY05 EPS which translates to a fair value of RM1.46. This suggests a 52% upside from current level. Bear in mind that our forecast is still fairly conservative and has potential of further upgrades if ExecSuite gains momentum. BUY


Potentially, Karensoft could make tons of Moola....

but... potentially does not necessary equates to profits.

For everything is gambled on Karensoft's management ability to turn potential into profits.

how?

ahh yes, ze ExecSuite is a prospect, will it deliver or not is one issue... but without it.... Karensoft is rather poor. It's there for all to see.

Look at Part I and Part II. These events happened before this article came out.

Karensoft's current net earnings was only 164k and its ytd net profit was of 0.98 million.

Company was burning up cash fast.

Loans were increasing!

And the company simply had an enormous problem with their sales collections. If one cannot collect, sooner or later, these debts are deemed doubtful and when it drags on longer it is deemed bad debts. And when it happens, the company has to write it off as a loss. And Karensoft's trade receivables were simply ballooning! It was totally incredible!

How?

And if one looks at Kenanga's write-up... it's actually there.... in the smaller prints....

They actually estimated a total net profit of 0.8 million for Fy 2004 for Karensoft (see the column under 04e). And at 0.96, they were recommending Karensoft based on a pe multiple of 81x!

But....but.... but... butttt......

they justifies their buy recommendations by arguing that Karensoft will makea whopping 6.8 million for FY 2005.

Will they or not.... that's what the investor had to decide!!!

Doesn't it pay to read the fine prints?

How?

Here is a compilation of comments/views on Karensoft's potential back then.

no way i will buy there are so many alternative to ms office.. some more free one like open office :D

But .... afterwards I also read a few stories about companies/government agencies turning back to MO, people used to the MSFT software, etc.

I use M Office for a very long time, and although I don't like some things, it is quite good, and the de facto standard, so very hard to beat.

yes, firstly i do think the software business is a really tough business. It does not have a strong competitive edge in its business economics. Too many hurdles in the business.

And i wud agree very much that nothing beats MO and that KarenSoft's ES might not sell as great as suggested by Kenanga.

However... i really do applaud KarenSoft .... for making the effort to produce its own software package, a software package that actually competes against the big M.

i think what karensoft create is not that great coz we can get the source code form the internet n just customised it. n to challange Microsoft Ofiice product,even others competitor likes lotus n others pun bungkus.

one more, to compete with prirate software in malaysia where people can buy software for rm5. software programmer tak boleh cari makan kat sini.

How?

The huge potential from Karensoft was proposed to the investing public/speculators/punters.

How?

Would you have followed?

Or would you realise that investing is not a game of follow me, follow you?

Mau ikut or tak nak?





to be cont.... Part IV!